Rennie v Westbury Homes (Holdings) Ltd

Contractual notices exercising unilateral rights are construed objectively. The question is how a reasonable recipient, aware of the contractual terms and relevant context, would have understood the notice. No particular form of words is required unless the contract makes specific information an indispensable condition of validity. A notice may be valid even if its sender subjectively intended it only as preparatory. Where a contract requires payment after service of a valid notice but specifies no payment date, the law generally implies payment within a reasonable time unless a different time is necessary to give effect to the contract. The payment need not be made before expiry of the period unless the contract so provides.

Peter Anthony Rennie sought declarations that an option agreement granted to Westbury Homes (Holdings) Ltd in 1992 had ceased and determined. The agreement permitted Westbury, during the last year of a ten-year option period, to require a five-year extension by written notice and payment of £20,000.

Westbury’s solicitors wrote on 12 September 2002 referring to the extension, clause 9.1 and arrangements for payment. The option period expired at midnight on 16 September. The £20,000 was transferred on 17 September. The issues were whether the letter was a valid extension notice and whether payment had to be made before expiry of the ten-year period.

1. Valid notice. The claim was dismissed. The Option Period had been validly extended for five years.
2. Clause 9.1 imposed two formal conditions: the notice had to be in writing and served on the intending Vendor during the last year of the Option Period. The requirement that the notice require an extension by five years prescribed the meaning to be conveyed, not particular words or details.
3. The notice therefore fell to be construed by the objective test in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749. The question was how a reasonable recipient, knowing the Option Agreement and the surrounding objective context, would understand it. The letter referred to the five-year extension, clause 9.1 and arrangements for the £20,000. It conveyed unambiguously that Westbury had decided to exercise its right.
4. Westbury’s undisclosed subjective intention, internal authorisation and mistaken belief about the expiry date were irrelevant. The objective approach could result in a document operating as a valid notice even though its sender did not intend it to do so.
5. Clause 9.1 did not require payment of £20,000 before expiry of the ten-year period. It required service of the notice during that period and then payment as a consequence of service. Since no payment time was specified, the law implied payment within a reasonable time unless a different time was required by necessary implication. No such implication arose. Payment approximately 15 hours after expiry was within a reasonable time.
6. If necessary, Mr Rennie could have made time of the essence by giving reasonable notice specifying a payment deadline. The claim was dismissed, with the precise form of the declaration and costs left for further argument.

First-instance decision. The judgment records that the claimant issued a claim under CPR Part 8, but no earlier judgment is stated.